Do I need a business license?

[ihearincolor]

I'm currently a graphic design student, and I intern for a local production company. I want to start getting into freelancing to make some extra cash. I know I won't need a business license for small gigs that pay cash, but do I need one for dealing with small businesses and what not... For taxes and so on. Thanks'!

[PanToshi]

Originally Posted by ihearincolor

I'm currently a graphic design student, and I intern for a local production company. I want to start getting into freelancing to make some extra cash. I know I won't need a business license for small gigs that pay cash, but do I need one for dealing with small businesses and what not... For taxes and so on. Thanks'!

Hi ihearincolor and welcome to GDF!

When you get settled please read this as well as these very important threads. They will give you all the info you need on how the forum runs, the rules and regs, and give you some background info on our long running, inside jokes

The need for a business license will depend on your location. I would suggest you check in with your local small business association on specifics – it will not be dependent on whether the freelance projects pay cash, nor the amount tendered.

Freelancing is a business, so all monies earned will be subject to income taxes, self-employment taxes and other business taxes, depending on your locality. A good accountant can help you wade through the different tax structures.

You may also want to check into separating your personal assets from your business so that you will not risk the loss in the event an unhappy client sues you for whatever reason.

Good Luck!

[skribe]

Here is a good place to start if you are in the USA.

http://www.sba.gov/community/blogs/s...tual-paperwork

[ihearincolor]

Thanks for the responses. I'm in South Carolina, so I will try and talk to someone on Monday

[<b>]

I've known several designers who wanted to do some freelancing, so they got a business license, talked to an attorney, got advice from a CPA, set up an LLC and separate bank account, and spent a bunch of money in the process. Unfortunately, they had no clients and few ever materialized.

Considering all this, just doing a freelance job every now and again, doesn't really require much in terms of setting up a business, and even in those locations that require business licenses, the small stuff doesn't raise any red flags that anyone cares about. What you definitely have to do is keep track of your freelance income and the expenses associated with it because you most definitely have to report it on your personal income tax form (the IRS most definitely cares).

It's kind of similar to a guy I know who thought that it would be all kinds of fun to learn how to fly fish. He bought all this expensive equipment: rods, flies, waders, special fishing jackets and headed out to a few local streams. Turns out he didn't like it, and now all that expensive stuff sits in a closet in his garage. It's similar with freelancing — cover your bases and do what's required, but don't confuse setting up an official business with the most important thing: finding paying clients. Without them, you don't have a business.

If and when your freelance business starts to take off you'll need to get serious about the accounting, various legalities, licenses, LLCs and separating your business finances from your personal finances. Until then, in my opinion, it's usually less hassle and less expensive to not put the cart in front of the horse. Instead, take it in steps as the situation warrants.

[PrintDriver]

I dunno <b>...
Freelancing is a business. You have to be serious about it. And you have to know what you are doing. That is why I never recommend students enter freelancing without first working for someone else and establishing somewhat of a reputation for themselves, ie with printers who can funnel work their way or with any of the interactive/web content places that are springing up everywhere and need part time contract workers for larger projects. There are other ways of starting with a client base than one business card at a time.
All it would take is one billboard design to go wrong and you are out several grand of your own money on just one blown print.

[<b>]

I don't disagree that you have to take freelancing (or any job) seriously. And I mostly agree that design students, since they're just learning the ropes, are not ready to take on paying clients as part of a profession for which they have neither the education nor the experience. On the other hand, I've seen notable exceptions to that rule.

The way the original poster phrased the question, however, indicates that he's just looking into picking up some extra cash through an occasional freelance job. Whether or not this is a good idea is debatable and certainly needs to be approached cautiously and without getting in over one's head.

Leaving aside the subject of whether or not he's ready to freelance, from the way the question was phrased, we're likely talking a couple of hundred dollars every now and again. Since college students are typically short on cash, my suggestion is that, under the circumstances, it's okay to not spend, in advance, a thousand dollars setting up business licenses, LLCs, separate bank accounts, filing separate tax returns, hiring tax consultants and paying attorney fees. It seems like expensive overkill for a college kid only thinking about an occasional freelance job.

When and if those occasional freelance jobs actually materialize and start turning into bigger jobs where thousands of dollars are at stake, it would certainly be time to start scaling up the business infrastructure. Until then, though, it might be more important for a student not to run up the credit card on non-essential expenses.

[MD]

I know in my state (WI) I did not need a business license to do some small freelance jobs when I was starting out. Since artwork is not sales taxable - I didn't need a business license/tax numbers to do a little side work for customers.

If a client did over $800 in business with me they were required to supply a 1099 at the end of the year.

I ended up getting an LLC set up which was pretty minimal in cost so I could run some printing for my clients.

[Possumgal]

Keeping the funds separate is important. One bit of good news is that most tax prep software can figure out your self-employment taxes. It's surprisingly easy. It should be good enough until you really get going.

Different states have differing laws on the business license/sales tax issue. Good idea to check with a professional.